Finance and Economic

) _ Inflation in the 17 euro countries spiked to the highest level in nearly two and a half years in March, official figures showed Thursday _ cementing market expectations that the European Central Bank will raise interest rates next week.

Eurostat, the EU’s statistics office, said consumer prices in the eurozone were 2.6 percent higher in March than the year before. That’s the highest rate since October 2008 and is way above the central bank’s target of keeping inflation at “close to, but below 2 percent.”

The increase was not anticipated _ the consensus in the markets was for inflation to remain at 2.4 percent.

Since Thursday provided Eurostat’s “flash” estimate for inflation, it included no details as to why inflation rose. Those will emerge in April.

Inflation dropped to zero percent in May 2009, but prices have since pushed higher largely on the back of rising energy and food costs as the global economy starts to grow again following the deepest recession since World War II.

Over the past month, comments from the European Central Bank have been increasingly hawkish on inflation. The bank’s rate-setters, including President Jean-Claude Trichet, have been giving heavy hints that the main interest rate will rise from the current record low of 1 percent at the next meeting on April 7.

The bank cut interest rates sharply from 4.25 percent in October 2008 as it tried to stave off the impact from the financial crisis and has kept borrowing costs unchanged at 1 percent since May 2009.

In many ways, it can argue that its strategy worked and it’s now time to start “normalizing” monetary policy, despite the ongoing debt difficulties and austerity measures in several countries, notably Greece, Ireland, Portugal and Spain. The eurozone economy as a whole has been growing strongly for over a year now, driven by a healthy rebound in Germany, Europe’s biggest economy.

“The ECB will want to move from emergency setup to more normal levels,” said Silvio Peruzzo, an economist at the Royal Bank of Scotland.

Peruzzo predicted the bank will begin the new cycle of interest rate rises next week, but he doesn’t believe that Thursday’s figures will cause undue alarm because much of the increase recorded in March was due to changes in the way food and clothing prices are measured in Italy and Spain.

Expectations that borrowing costs in the eurozone are on their way up have helped support the euro currency over the past few weeks. By early afternoon London time, the euro was trading 0.7 percent higher on the day at $1.4214.

Interest rate increases, or even expected ones, benefit the euro if other central banks don’t do the same.

The U.S. Federal Reserve, for example, is not expected to raise its super-low interest rates until the latter part of this year, while the Bank of England’s rate-setting committee is fretting about the impact of higher borrowing costs on the fragile British economy.

Michael Hewson, market analyst at CMC Markets, said the key now will be how hawkish Trichet is in the aftermath of next week’s “increasingly likely” rate hike and in particular whether he will reiterate his call for “strong vigilance.” Throughout his presidency, that’s been code for a likely rate rise in the following month.

“As far as the single currency is concerned, it continues to benefit from yield differentials as markets factor in multiple rate hikes throughout 2011, while other central banks such as the Bank of England and the Federal Reserve fret about the effect any planned rise in rates could have on consumer spending and growth,” Hewson said.

“It would appear that the ECB has no such worries about that, and seems determined to try and put the inflation genie back in the bottle,” he added.

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European Union leaders called for worldwide stress testing of nuclear plants on Friday and committed to putting their 143 reactors through the toughest security checks possible.

France, one of the nations most reliant on nuclear energy, with 58 reactors, said it would immediately close any plant if it failed a test.

At the end of a two-day summit, the EU nations agreed to submit their nuclear plants to tough safety tests by year-end and promised to heed the lessons from the accident at Japan’s Fukushima Dai-ichi nuclear complex.

German Chancellor Angela Merkel said the 27 leaders agreed “on uniform euro stress tests and the highest possible safety standards.”

“The experience of Japan has to be reflected in the new stress tests. This is not business as usual,” she said.

Merkel’s comments come two weeks since a magnitude-9 quake triggered a tsunami that knocked out the Fukushima reactor’s cooling system. Japanese Prime Minister Naoto Kan said Friday the fight to stabilize the plant remains “very grave and serious,” as officials said they suspected there was a breach in the core of a reactor that could mean more serious contamination.

The fallout has set off fears of the biggest radioactive contamination since the 1986 disaster at Ukraine’s Chernobyl, which spewed radiation across a wide distance and continues to haunt Europeans.

“European stress tests will be prepared in a coordinated fashion,” Merkel said after the summit. “The aim is the highest possible safety standard,” she said, insisting the EU would press for other European nations to follow suit.

EU officials will follow up the nuclear issue during talks in Ukraine next month. Nuclear energy is key for Ukraine, a country of 46 million. Ukraine today operates 15 reactors at four power plants, which generate nearly half of all its electricity.

“Because the danger does not stop at our borders, we encourage and support neighboring countries to do similar stress-tests,” said EU President Herman Van Rompuy. “A worldwide review of nuclear plants would be best.”

There are currently 442 nuclear power reactors in operation around the globe, with 65 more under construction. Five are in long-term shutdown.

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The economic newspaper Nihon Keizai Shimbun says the government estimates the economic toll from Japan’s earthquake and tsunami could exceed $300 billion.

The newspaper said Economy Minister Kaoru Yosano will present the estimate of 15 trillion yen to 25 trillion yen ($185 billion to $300 billion) at a Cabinet meeting on Wednesday.

The March 11 magnitude-9 Business Card Holders.0 quake and tsunami devastated Japan’s northeastern coast and triggered a crisis at a nuclear power plant.

Utilities have imposed power rationing, many factories remain closed and key rail lines are impassable.

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Tiffany & Co. lowered its first-quarter earnings guidance Monday because of store closings and limited hours in Japan resulting from the earthquake and tsunami.

The dimmer outlook came as the jeweler said strong holiday demand and new products helped its fourth-quarter net income rise 29 percent.

Tiffany is one of the U.S. retailers most exposed to Japan’s economy and appetite for luxury goods. Of Tiffany’s 233 stores, 56 are in Japan. It’s also one of the first companies to specify the business impact of the quake.

The jewelry maker known for its turquoise box now expects first-quarter earnings of about 57 cents per share, down from a previous forecast 62 cents per share.

Analysts surveyed by FactSet predicted lower earnings of 55 cents per share.

The company’s stores in the Kanto and Tohoku regions, which make up more than half of its Japanese sales, were closed or had reduced hours after the disasters. Physical damage was limited to only a few stores, the company said.

The retailer expects Japanese sales, 18 percent of its business, will drop 15 percent in the first quarter.

For the full year, the company anticipates adjusted earnings of $3.35 to $3.45 per share. Wall Street forecasts $3.70 per share.

Fourth-quarter net income increased to $181.2 million, or $1.41 per share, for the period ended Jan. 31. That compares with $140.4 million, or $1.09 per share, a year ago.

Excluding a charge tied to moving its New York headquarters staff, earnings from continuing operations were $1.44 per share.

Analysts expected earnings of $1.39 per share.

Its stock gained $2.89, or 5 percent, to $60.18 in premarket trading Monday.

Revenue improved to $1.1 billion from $981.4 million, matching expectations. The company reported sales increased across all regions and said new products, such as its yellow diamond collection, helped its performance.

Tiffany’s full-year earnings climbed 39 percent to $368.4 million, or $2.87 per share, from $264.8 million, or $2.11 per share.

Adjusted earnings from continuing operations were $2.93 per share.

Annual revenue rose 14 percent to $3.09 billion from $2.71 billion.

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Asia’s share of the second tranche of European Union bonds sold to help finance aid to Ireland dropped by almost 50 percent, reflecting the securities’ longer maturity and weaker Japanese demand, the EU said.

Asian buyers accounted for 11 percent of the 4.6 billion euros ($6.5 billion) of seven-year securities issued to raise money for Ireland and Romania, the European Commission said. That compares with Asia’s 21.5 percent share of an EU sale of five-year bonds in January. It’s still above Asia’s 4 percent average for EU bond sales between December 2008 and this year.

The decline yesterday resulted from the inability of some Asian central banks to buy bonds with maturities of more than five years and from lower demand in earthquake-stricken Japan, said Gerassimos Thomas, the Luxembourg-based director in charge of the sale at the commission.

“The seven-year maturity is an odd maturity for a benchmark issue and the situation in Japan is obviously difficult,” Thomas said today by telephone. “Despite that, the transaction was an overwhelming success.”

The commission, the 27-nation EU’s executive arm, sold the seven-year bonds at a yield of 8 basis points more than the mid- swap rate. It said the books for the securities paying a coupon of 3.25 percent were oversubscribed more than three times and were closed in less than two hours.

AAA-Rated EFSM

As a result of the issue, the commission will disburse 3.4 billion euros to Ireland through the European Financial Stabilization Mechanism and 1.2 billion euros to Romania under the Balance of Payments facility, which is for EU nations outside the euro area. The AAA-rated EFSM is responsible for providing 22.5 billion euros of the Irish rescue package of 85 billion euros.

The U.K. represented 29 percent of yesterday’s allocation, Germany and Austria a combined 16 percent and France 9 percent, according to the commission. The Americas accounted for 6 percent and the Middle East and Africa a joint 4 percent, it said.

Asset managers and banks were the “drivers” of the transaction, each accounting for 36 percent, the commission said. Central banks and other “official” institutions represented 18 percent, while insurance and pension companies took 8 percent, according to the commission.

The commission-run EFSM plans to raise as much as 17.6 billion euros this year and 4.9 billion euros in 2012 for Ireland. This year, the EFSM intends to issue four to five benchmark bonds worth 3 billion euros to 5 billion euros each. Three of those sales, including the issues yesterday and in early January, are due in the first half.

Japanese Government

The separate European Financial Stability Facility, which is overseen by euro-area governments, is providing 17.7 billion euros to Ireland. In the EFSF’s inaugural bond sale in late January — 5 billion euros of five-year notes — Asian investors represented 38 percent of the allocation. The Japanese government bought more than a fifth of the issue.

The EFSF plans to raise up to 16.5 billion euros this year and 10 billion euros in 2012 to finance its share of the Irish bailout. Because of buffers meant to ensure its AAA credit rating, the EFSF is raising a total of almost 27 billion euros this year and in 2012 in order to lend 17.7 billion euros to Ireland.

The EFSF intends this year to sell a total of three benchmark bonds worth 3 billion euros to 5 billion euros. The second EFSF sale is due before July.

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China says it has “serious reservations” about a United Nations resolution authorizing a no-fly zone over Libya and military action to protect civilians against Moammar Gadhafi’s forces.

The Foreign Ministry said in a statement Friday that China opposes using military force in international relations.

The ministry says China has consistently stressed respect for Libya’s sovereignty, independence, unity and territorial integrity and that the crisis should be resolved through dialogue guaranteed online personal loans.

China was among five countries that abstained from Thursday’s vote on the U.N. resolution to allow “all necessary measures” to stop Gadhafi. It was approved with the backing of the United States, France and Britain.

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Nigeria’s central bank will meet the rising need from investors for foreign currency before elections next month as it tries to stabilize the naira and control inflation, Governor Lamido Sanusi said.

The jump in demand this month is “temporary,” based on investors’ fears that violence between religious and ethnic groups may disrupt elections, Sanusi said in an interview in Nigeria’s capital, Abuja, yesterday.

Sanusi has been defending the naira, keeping it within a range of between 3 percent above or below 150 per dollar, in a bid to curb inflation in Africa’s biggest oil producer. That policy has led the bank to deplete its foreign currency reserves, raising concern at the International Monetary Fund, which said last month the central bank should allow for more exchange-rate flexibility.

“So long as we’re comfortable with the coverage given by the reserve position of the country we will pursue a stable exchange rate policy,” Sanusi said. “If we see an elevation in demand, that in our judgment is temporary, we will meet that demand. Nothing has changed fundamentally as far as the economy is concerned. But people want to see a smooth transition, a free and fair election before they bring back the money.”

The naira weakened to its lowest level in 18 months against the dollar today, depreciating 0.1 percent to 156.30 per dollar as of 12:15 p.m. in Lagos.

April Elections

Africa’s most populous nation, with 150 million people, will hold elections for parliament on April 2, the president on April 9 and state officials on April 16. Attacks by Islamic militants in northern Nigeria, including Christmas Eve bomb blasts that killed 80 people, are deepening religious tensions before the polls. The last election in 2007, won by Umaru Yar’Adua, was marred by violence and election fraud.

“With an African country like Nigeria going into elections, where people are talking about ethnicity and religion, you get people trying to get out, to buy dollars and hedge their risks,” Sanusi said. “That puts pressure on the exchange rate and foreign currency reserves.”

Nigeria’s foreign exchange reserves plunged by almost $10 billion to $33.1 billion in the year through Nov. 29 as the central bank propped up the currency and the government withdrew oil savings from its excess crude account. The government has now reversed that trend, with reserves climbing to a five-month high of $36.4 billion on March 8, according to the central bank’s data.

Rate Impact ‘Questionable’

With import costs accounting for about 70 percent of the consumer price index, keeping the naira stable is crucial to fight inflation, Sanusi said.

Nigeria’s inflation rate fell to an annual 11.1 percent in February from 12.1 percent in the previous month, the statistics office said yesterday. The central bank, which raised its benchmark interest rate by a quarter of a percentage point to 6.5 percent on Jan. 25, is due to make its next rate decision next week.

While the bank is concerned about the impact of rising government spending, oil and food costs on inflation, the short- term impact of raising interest rates is “questionable,” Sanusi said.

“I have no doubt in my mind that sustained expansion in money supply and low interest rates for a long time would be inflationary,” Sanusi said. “But the extent to which a short- term movement in rates and monetary aggregates would affect inflation in the short term is more questionable.”

The Monetary Policy Committee will assess the “balance of risks” of rising costs against the stability of the banking system when making its next interest-rate decision, he added.

– Editors: Ana Monteiro, Karl Maier.

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Mounting concerns over the impact of the massive earthquake in Japan pushed stocks lower Monday. The earthquake and tsunami along Japan’s northeast coast killed thousands and has raised fears of a slowdown in the world’s third-largest economy.

All 10 company groups that make up the Standard and Poor’s 500 index fell. Utilities companies lost 1.9 percent, the most of any group, on worries that the disaster may lead to increased skepticism over the safety of nuclear power plants.

The S&P index, the basis for most U.S. mutual funds, fell 15 points, or 1.2 percent, to 1,288.

The Dow Jones industrial average fell 122, or 1 percent, to 11,922. The Nasdaq composite fell 29, or 1.1 percent, to 2,686.

Japan’s central bank pumped a record $184 billion into money market accounts to encourage bank lending. Financial analysts said the move could put pressure on Japan to raise interest rates, particularly since the country is saddled with a massive debt that, at 200 percent of gross domestic product, is the biggest among developed nations.

“The fiscal position is deteriorating in Japan,” said Channing Smith, managing director of equity strategies at Capital Advisors Inc. “If we get higher interest rates, that is a major threat to … the global recovery.”

Japan’s benchmark Nikkei 225 index fell 633.94 points, or 6.2 percent, to close at 9,620.49 _ its lowest level in four months. The decline wiped out this year’s gains.

Upscale retailers with large businesses in Japan fell. Tiffany & Co. lost 6 percent, and Coach Inc. lost 6.2 percent. Caterpillar Inc. gained 1 percent on assumptions that it will benefit from large-scale rebuilding efforts.

In the U.S., Warren Buffett’s Berkshire Hathaway Inc. said it would purchase chemical company Lubrizol for $9 billion in cash. Berkshire will pay $135 per share, a 28 percent premium to Lubrizol’s closing stock price Friday of $105.44. Berkshire’s Class B shares fell 1 percent on the news, while Lubrizol rose 27 percent.

Cephalon Inc. fell less than 1 percent after a federal court overturned two of the patents on its painkilling drug Fentora. That could allow competitors to start selling cheaper generic versions of the drug soon.

Oil prices fell 58 cents to $100.56 a barrel. Bond prices rose, sending yields lower. The yield on the 10-year Treasury note fell to 3.35 percent from 3.41 percent late Friday.

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Chinese authorities have arrested 3,001 people in their latest crackdown on rampant product piracy and seized fake or counterfeit medicines, liquor, mobile phones and other goods, officials said Sunday.

The campaign launched in October comes as Beijing faces pressure from the United States and other trading partners to stamp out product copying. China is a leading soure of fake goods despite repeated crackdowns, but Chinese officials have promised the latest enforcement will produce lasting results.

Communist leaders have given the new crackdown special prominence, publicly linking it to efforts to transform China from a low-cost factory to a creator of profitable technology by nurturing companies in software and other fields. China’s fledgling software, music and other creative companies have been devastated by unlicensed copying.

“Intellectual property protection is essential for building an innovation-oriented country and achieving a shift from `China manufactured’ to `China innovated,’” Li Chenggang, deputy director of the Commerce Ministry’s law department, said at a news conference. He was joined by officials of China’s commerce, intellectual property and other agencies.

Trade groups say illegal Chinese copying of music, designer clothing and other goods costs legitimate producers billions of dollars a year in lost potential sales. The American Chamber of Commerce in China says 70 percent of its member companies consider Beijing’s enforcement of patents, trademarks and copyrights ineffective.

Businesspeople have expressed optimism about the latest effort because a rising Communist Party star, Vice Premier Wang Qishan, has been put in charge and an enforcement office set up in the Commerce Ministry payday loans.

A report distributed at Sunday’s news conference said that goods seized in the latest crackdown include 26,000 mobile phones, some with phony Nokia and Apple labels, copies of Louis Vuitton bags and Rolex watches, automotive components, DVDs and clothing.

It said authorities shut down 292 websites selling counterfeit and fake goods.

Also Sunday, the official Xinhua News Agency said 23 people accused of producing fake medicine were detained in the central city of Jingzhou in Hubei province. It said they made more than 100 million capsules filled with sawdust and wheat flour and sold under the brand names of 201 different types of medication.

Xinhua said the medicines were sold by mail and over the Internet but gave no details of whether anyone was injured or which brand names were counterfeited.

Piracy is especially sensitive at a time when Washington and other Western governments are trying to create jobs by boosting exports. In 2009, the World Trade Organization upheld a U.S. complaint that Beijing was violating trade commitments by failing to root out the problem.

Rampant copying also has hampered Beijing’s efforts to attract technology industries because businesspeople say companies are reluctant to do high-level research in China or bring in advanced designs for fear of theft.

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AOL CEO Tim Armstrong said Thursday the company is cutting 200 jobs in the U.S. and 700 in India following its $315 million purchase of the Huffington Post.

Armstrong, speaking at the Bloomberg Media Summit in New York City, lamented the cuts but said AOL (AOL) is "much more healthy" than it was a few years ago.

"From a portfolio perspective, you need to continue to invest in things that make you profitable," Armstrong said. He added that he would address his employees about the cuts after leaving the conference.

Armstrong added that AOL’s staff is moving toward having 70% of its staff be in editorial or other content divisions. That’s up from a little more than half currently. He also said AOL intended to have more full-time workers and fewer freelancers.

AOL unloaded 40% of its cash on the Huffington Post purchase last month. As part of the deal, HuffPo founder Arianna Huffington became president and editor-in-chief of all HuffPo and AOL content.

At the conference, Armstrong said Huffington was moving to New York City Thursday.

"She is fearless, and she wants to do great things," Armstrong said. "I didn’t know her that well, but we had spoken on a few panels together. She approached me saying that we had a similar vision."

Armstrong said the HuffPo buy was "a signal" to competitors about AOL’s path and a reflection of his belief that the digital space "is only going to get bigger."

In the past year, AOL has spent $530 million on acquisitions as it focuses on becoming a content company rather than an outdated Internet portal payday loans guaranteed no fax. In a single week last September, AOL bought TechCrunch, online video distributor 5Min Media and social media company Thing Labs.

Armstrong also discussed AOL’s dial-up business, which currently accounts for 40% of its revenue. He said that business "still has a few years," but AOL’s annual yearly decline in that revenue stream is 25-29%.

"You have to reinvest in your content," Armstrong said. "Access to cash can be like a rich uncle — you just get money and you never have to learn. It’s time for that to change."

Armstrong implied the content acquisitions are a positive for the "bunch of big shareholders who hold onto the stock." He said AOL stock had a "pretty small float," and he noted that he invested $10 million of his own cash in company stock a few weeks ago.

Nonetheless, AOL’s stock fell about 1% Thursday morning. Shares are currently trading near their lowest level since AOL was spun-off from CNNMoney parent company Time Warner (TWX, Fortune 500) in November 2009. The stock has dropped nearly 25% since its IPO.

But Armstrong remained optimistic.

"AOL will turn around. I have no doubt about that. The employees deserve a ton of credit," he said. "To go from managing a decline to managing growth is physically getting up and doing something different every day." 

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